Fairfax 2025

[Junior R]

1 hour ago, Viking said:

A new book is coming out on Fairfax called ‘The Fairfax Way: Inside Prem Watsa’s Secret to Lasting Success’.  I am really looking forward to getting a copy… Available for pre-ordered (Nov 18 release). It is desperately needed. Looks to me like the author (David Thomas) nailed the timing of its release.
 

https://www.amazon.ca/Fairfax-Way-Inside-Lasting-Success/dp/1037802195
 

----------

About the author (from Amazon): DAVID THOMAS has had a front-row seat on the Canadian business world for several decades in Toronto, serving twice as Editor of the Financial Post and leading the reporting team at the Globe and Mail’s Report on Business. He served stints as Editor-in-Chief at MoneySense, Marketing and Canadian Business, and as Business Editor at Maclean’s. He was born in Vancouver and is currently based in London, England, where you can still buy newspapers at the convenience store.

 

Nice find lol you also became a publisher (Joking)

 

• Publisher ‏ : ‎ Viking
• Publication date ‏ : ‎ Nov. 18 2025
• Language ‏ : ‎ English
• Print length ‏ : ‎ 376 pages
• ISBN-10 ‏ : ‎ 1037802195
• ISBN-13 ‏ : ‎ 978-1037802195
• Item weight ‏ : ‎ 597 g
• Dimensions ‏ : ‎ 15.98 x 3.15 x 23.52 cm
• Best Sellers Rank: #55,954 in Books (See Top 100 in Books)
  • #19 in Knowledge Capital
  • #67 in Asian & Asian American Biographies
  • #143 in Captains of Industry

[John Hjorth]

46 minutes ago, Junior R said:

Nice find lol you also became a publisher (Joking)

• Publisher ‏ : ‎ Viking
• Publication date ‏ : ‎ Nov. 18 2025
• Language ‏ : ‎ English
• Print length ‏ : ‎ 376 pages
• ISBN-10 ‏ : ‎ 1037802195
• ISBN-13 ‏ : ‎ 978-1037802195
• Item weight ‏ : ‎ 597 g
• Dimensions ‏ : ‎ 15.98 x 3.15 x 23.52 cm
• Best Sellers Rank: #55,954 in Books (See Top 100 in Books)
  • #19 in Knowledge Capital
  • #67 in Asian & Asian American Biographies
  • #143 in Captains of Industry

 

Lars [ @Viking ],

 

Please tell us something. Are you in on this?

 

[Thrifty3000]

8 hours ago, mananainvesting said:

 I got this from Perplexity. 

Don’t forget to overlay charts of BRK’s PE Ratio and Price to Book over that timeframe. I think it’s fair to say BRK’s valuation got pretty frothy at times. I doubt many people would argue FFH’s current valuation is too lofty - unless they work for Morningstar.

[Viking]

23 minutes ago, John Hjorth said:

 

Lars [ @Viking ],

 

Please tell us something. Are you in on this?

 

No. I have not been involved with this book. That is a very funny coincidence. 

[John Hjorth]

33 minutes ago, Viking said:

No. I have not been involved with this book. That is a very funny coincidence. 

 

Lars [ @Viking ],

 

It has the bad odor of somebody trying to coin some money on what is actual your IP and work on Fairfax made available here on CofB&F for free, however I'm not totally sure this is a fact, because that thingy on Amazon is on status 'preorder'.

 

Also, your activity on X here comes to mind.

 

I know you don't need any advice from any of us here on CofB&F about which initial actions to carry out to obtain certainty of what this really is about.

Edited October 22, 2025 by John Hjorth

[Gregmal]

Viking publishing is one of the biggest names in publishing. 

[TwoCitiesCapital]

On 10/20/2025 at 1:11 PM, SafetyinNumbers said:

Have you done a study on what their positioning was from 2016-2025 and what the benefit/cost was? If so can you please share?

 

I like the optionality of being shorter duration. If long rates do go up then it might create a hard market which they can take advantage of. If not, the lower interest income potential doesn’t stop them from still reaching a 15% ROE given all of the embedded gains in the equity portfolio. 

 

I've not done the $ calculations, but I'm guessing it worked out in their favor only because 1) the float that benefitted from higher rates was significantly larger than the float that was hurt by lower rates because of the unforeseen (in 2016) hard market for insurance that occurred AND because 2) COVID/stimulus caused rates to spike to their highest levels in 20-years at the fastest rate in 50-years. 

 

And it worked out in their favor only compared to the buy/hold alternative. If we assume they're active, and want them to be active, then we have to also give them credit for MISSING the last cycle and NOT adding duration in 2018 and dropping it in 2020 which would have been the correct way to play it adding missed capital gains to the losses from significantly reduced income.

 

Neither COVID nor the hard market was the thesis for going to 100% t-bills in 2016 when Trump was elected. It "worked" out because they got lucky - and only got lucky because they stayed wrong for 5-years running after missing the turn in rates in 2018/2019. The other times they stayed wrong for 5+ years (deflation swaps, equity hedges/shorts) costed us billions. 

 

So I judge the decision based on how it was made, when it was made, and the information at the time it was made. Not because they  happened to get lucky and have it work out. 

[Viking]

3 hours ago, John Hjorth said:

 

Lars [ @Viking ],

 

It has the bad odor of somebody trying to coin some money on what is actual your IP and work on Fairfax made available here on CofB&F for free, however I'm not totally sure this is a fact, because that thingy on Amazon is on status 'preorder'.

 

Also, your activity on X here comes to mind.

 

I know you don't need any advice from any of us here on CofB&F about which initial actions to carry out to obtain certainty of what this really is about.

@John Hjorth, I have no doubt the book is legit. And I have no concerns. As I said before, I look forward to reading the book. The more information that gets out on Fairfax the better - it is a great company and its story deserves to be told. I hope the author has read my stuff and found it helpful when writing his book. I hope/expect his book reaches a much larger audience than my writing does. 

[thowed]

3 hours ago, Gregmal said:

Viking publishing is one of the biggest names in publishing. 

 

Yep, they're a division of Penguin Random House.

[djokovic1]

I reviewed the WR Berkeley results and they made a comment about insurance companies self-sabotaging themselves currently. That freaked out the analysts (and maybe the market). 

 

However:

 

i) Management were referring to the E&S market, which as far as I know is not a big part of Fairfax's book

 

ii) WR Berkely trades at 2x the multiple both w.r.t PE and book (and lower ROE), so FFH has a much larger margin of safety (compared to them and also compared to most other similar insurers - MKL for example)

 

iii) I am not too concerned about a slowdown in premium growth. Majority of their ROE will be derived from their investment book (not underwriting) and they will continue to buyback shares and minorities + M&A with their surplus capital.

In additional, overall the WRB results were quite good

Edited October 22, 2025 by djokovic1

[MMM20]

10 hours ago, Viking said:

A new book is coming out on Fairfax called ‘The Fairfax Way: Inside Prem Watsa’s Secret to Lasting Success’.  I am really looking forward to getting a copy… Available for pre-ordered (Nov 18 release). It is desperately needed. Looks to me like the author (David Thomas) nailed the timing of its release.
 

https://www.amazon.ca/Fairfax-Way-Inside-Lasting-Success/dp/1037802195

 

"Books › Biographies & Memoirs › Community & Culture › Asian & Asian American"

 

It's not in the Business category? Even the book screens poorly.

 

[SafetyinNumbers]

6 hours ago, TwoCitiesCapital said:

 

I've not done the $ calculations, but I'm guessing it worked out in their favor only because 1) the float that benefitted from higher rates was significantly larger than the float that was hurt by lower rates because of the unforeseen (in 2016) hard market for insurance that occurred AND because 2) COVID/stimulus caused rates to spike to their highest levels in 20-years at the fastest rate in 50-years. 

 

And it worked out in their favor only compared to the buy/hold alternative. If we assume they're active, and want them to be active, then we have to also give them credit for MISSING the last cycle and NOT adding duration in 2018 and dropping it in 2020 which would have been the correct way to play it adding missed capital gains to the losses from significantly reduced income.

 

Neither COVID nor the hard market was the thesis for going to 100% t-bills in 2016 when Trump was elected. It "worked" out because they got lucky - and only got lucky because they stayed wrong for 5-years running after missing the turn in rates in 2018/2019. The other times they stayed wrong for 5+ years (deflation swaps, equity hedges/shorts) costed us billions. 

 

So I judge the decision based on how it was made, when it was made, and the information at the time it was made. Not because they  happened to get lucky and have it work out. 

I don’t think of it as trying to time the market but taking an expected value approach to fixed income investing much as they do with equity investing. I’m not expecting them to trade every move correctly, that would be impossible. If you ever do the study, please share. 

[SafetyinNumbers]

12 hours ago, Viking said:

A new book is coming out on Fairfax called ‘The Fairfax Way: Inside Prem Watsa’s Secret to Lasting Success’.  I am really looking forward to getting a copy… Available for pre-ordered (Nov 18 release). It is desperately needed. Looks to me like the author (David Thomas) nailed the timing of its release.
 

https://www.amazon.ca/Fairfax-Way-Inside-Lasting-Success/dp/1037802195
 

----------

About the author (from Amazon): DAVID THOMAS has had a front-row seat on the Canadian business world for several decades in Toronto, serving twice as Editor of the Financial Post and leading the reporting team at the Globe and Mail’s Report on Business. He served stints as Editor-in-Chief at MoneySense, Marketing and Canadian Business, and as Business Editor at Maclean’s. He was born in Vancouver and is currently based in London, England, where you can still buy newspapers at the convenience store.

 

The first book on Buffett/BRK came out in 1992. At the end of 1991, BRK traded around 1.4x BV and the multiple proceeded to double over the next 5 years. It makes sense as book readers might be the type to buy (demand) and hold (reduce future supply). It took until BRK issued stock (increased supply) for the Gen Re deal for the multiple to come down. 

[73 Reds]

14 hours ago, Gregmal said:

What is this worth on the other side of the cycle? Think you can make the case for high teens or low 20 multiple on trough-ish EPS. 

I'm not adding here (yet) but like some others, am not concerned about the precise valuation from cycle to cycle.  The issue is whether the company can continue to grow BV at or about the same rate it has grown throughout its history.   It's the same watermark I always considered with Berkshire.    

[petec]

On 10/21/2025 at 12:43 AM, djokovic1 said:

???
You have to match your liquidity needs while maximizing ROE.

Liquidity is not the reason for their current posture (and Ben confirmed as much)

 

One gap in my knowledge is how regulators look at bond impairments.

 

IIRC, when you hold a bond to maturity you record it at amortized cost for accounting purposes, but when you hold it as available for sale you mark it to market. Therefore, a long duration available for sale portfolio takes a large M2M impairment when rates rise, but the same portfolio held to maturity does not. 

 

Which way do regulators see it? Because clearly you don't want to impair solvency by going too long. So if regulators mark bonds to market for solvency purposes, then all else equal you want to bias short.

 

Anyone know?

[gfp]

6 minutes ago, petec said:

 

One gap in my knowledge is how regulators look at bond impairments.

 

IIRC, when you hold a bond to maturity you record it at amortized cost for accounting purposes, but when you hold it as available for sale you mark it to market. Therefore, a long duration available for sale portfolio takes a large M2M impairment when rates rise, but the same portfolio held to maturity does not. 

 

Which way do regulators see it? Because clearly you don't want to impair solvency by going too long. So if regulators mark bonds to market for solvency purposes, then all else equal you want to bias short.

 

Anyone know?

 

In my limited experience I have seen that statutory accounting (for the regulators) treats all bonds as if they were held to maturity - at amortized cost.

[djokovic1]

My spidey sense tells me Fairfax underwriting results will be very strong for this quarter (looking at peer results, no big cat, reserve releases)

[SafetyinNumbers]

15 minutes ago, djokovic1 said:

My spidey sense tells me Fairfax underwriting results will be very strong for this quarter (looking at peer results, no big cat, reserve releases)

I think that’s just called analysis. The BMO analyst on the other hand expects higher cat losses than last year and a combined ratio of 97.9.

[djokovic1]

11 minutes ago, SafetyinNumbers said:

I think that’s just called analysis. The BMO analyst on the other hand expects higher cat losses than last year and a combined ratio of 97.9.

haha sure I will take it…alongside a big under on the BMO analyst

[yesman182]

6 hours ago, djokovic1 said:

I reviewed the WR Berkeley results and they made a comment about insurance companies self-sabotaging themselves currently. That freaked out the analysts (and maybe the market). 

 

However:

 

i) Management were referring to the E&S market, which as far as I know is not a big part of Fairfax's book

 

ii) WR Berkely trades at 2x the multiple both w.r.t PE and book (and lower ROE), so FFH has a much larger margin of safety (compared to them and also compared to most other similar insurers - MKL for example)

 

iii) I am not too concerned about a slowdown in premium growth. Majority of their ROE will be derived from their investment book (not underwriting) and they will continue to buyback shares and minorities + M&A with their surplus capital.

In additional, overall the WRB results were quite good

Here is what Evan at Chubb said about their prospects:

 

Quote

Our digital and AI efforts, years in the making are contributing to growth and beginning to transform the company in how we do business. Our balance sheet, starting with loss reserves has never been stronger. We estimate that 70% to 80% of our businesses present attractive growth opportunities. And looking forward from all we can see our performance is enduring.

 

We will maintain superior earnings growth, including double-digit growth in EPS, book intangible book value and core operating ROE increasing to 14-plus percent over the medium term. In the quarter, we stepped up share buybacks and because we are an excellent investment with our stock trading well below intrinsic value.

 

Increased buyback activity will continue while at the same time, we will continue to build additional capital and our invested assets. I'm going to turn the call over to Peter now, and then we're going to come back and take questions.

 

I hope the future for Chubb is as bright in reality as it is in Evan's mind. 

[TwoCitiesCapital]

9 hours ago, Haryana said:

AI: Luck is often described as the intersection of preparation and opportunity. This idea suggests that what many perceive as luck is actually the result of being ready when a chance arises. 

 

 

You're falling victim to resulting. 

 

Nothing that they said they were preparing for in 2016 change of positioning happened. An entirely unrelated, and unforeseen, set of circumstances came to be 5-years after they made the bet to bail them out of it. 

[TwoCitiesCapital]

5 hours ago, SafetyinNumbers said:

I don’t think of it as trying to time the market but taking an expected value approach to fixed income investing much as they do with equity investing. I’m not expecting them to trade every move correctly, that would be impossible. If you ever do the study, please share. 

 

The expected value framing makes no sense. They didn't exit duration in 2015 when rates were lower. They didn't add duration in 2018/2019 when rates were higher than where they exited. 

 

They exited their duration immediately following Trump's election. They said themselves that they expected economic growth to take off and rates to run much higher. They were wrong. 

 

They got rates modestly higher, never locked those in, a global pandemic and recession where long-end rates went to 0, missed out on additional income and massive capital gains potential for a handful of years, and were bailed out of all of it by a combination of an unforeseen hard market for insurance which ballooned the float that could then be invested at higher rates as rates rose their fastest pace in 50-years ....from supply chain disruptions/inflation expectations and not Trump's economic growth from policies passed 5-years priors. 

 

I'm not upset about it. The terrible call and investor fatigue after a string of terrible calls is what allowed me to renter the position in size at $250-450 2-years after selling my stake for $500-600. 

 

But I'm not rewriting the history because they got lucky - they were wrong from 2016 - 2020. They were right from 2021 - 2024. 2025 onward remains to be seen, but it's a coin toss and I don't like those odds. Would prefer to see neutral duration positioning with their alpha earned on credit opportunities. They seem to have a better track record with that.  

Edited October 22, 2025 by TwoCitiesCapital

[dartmonkey]

3 hours ago, SafetyinNumbers said:

The BMO analyst on the other hand expects higher cat losses than last year and a combined ratio of 97.9.

Higher cat losses? Are they thinking of anything in particular? 

 

Grok couldn't come up with much:

 

Basis for Projections

• Global Cat Loss Context: Q3 2025 (July–September) was unusually quiet for major events, with insured losses estimated at under $15 billion globally—the lowest since 2016 and well below the 10-year Q1–Q3 average of $70–80 billion. For the first nine months of 2025, cumulative insured losses totaled $105–114 billion, driven by Q1 events (e.g., Los Angeles-area wildfires causing ~$40 billion insured globally). This "top-heavy" year means Q3 contributed minimally (10–13% of YTD totals), per Gallagher Re and Aon reports.
• Fairfax's Historical Share: Fairfax's cat losses typically represent 0.5–1% of global insured totals, depending on exposure (e.g., higher in U.S./North American perils). In Q3 2024, Fairfax reported $434.5 million in cat losses (up from $388.7 million in Q3 2023), contributing ~3.5–4% points to its combined ratio. For Q3 2025, with subdued activity, projections align with normalized levels rather than spikes.
• Key Q3 2025 Events and Potential Impact:
  • Typhoon Gaemi (early July, Asia-Pacific): Multi-billion-dollar insured losses (~$2–3 billion regionally), affecting infrastructure in Taiwan, Philippines, and China. Fairfax's Asia exposure (via Gulf Insurance Group) could yield $20–50 million in losses.
  • Typhoon Shanshan (late August, Japan/South Korea): Moderate insured impact (~$1–2 billion), unlikely to trigger major reinsurance hits for Fairfax (minimal portfolio overlap).
  • Minor Flooding/Heatwaves: Scattered events in Europe (e.g., Spain floods spillover) and Africa added ~$5–10 billion globally but were low-severity for insurers.
  • No major U.S. hurricanes or wildfires in Q3, unlike Q1's $40+ billion LA fires (which hit Fairfax for ~$692 million).

[TwoCitiesCapital]

1 hour ago, Haryana said:

Maybe they play the game of probabilities and keep their options open for a wide range of unknowable possibilities. 

 

 

So equity hedges and deflation swaps aren't macro calls that failed?

But rather "keeping their options open for a wide range of unknowable possibilities"? 

 

Or is that only the case when it's fixed income and they lucked into being right? 

 

[Castanza]

2 hours ago, TwoCitiesCapital said:

 

The expected value framing makes no sense. They didn't exit duration in 2015 when rates were lower. They didn't add duration in 2018/2019 when rates were higher than where they exited. 

 

They exited their duration immediately following Trump's election. They said themselves that they expected economic growth to take off and rates to run much higher. They were wrong. 

 

They got rates modestly higher, never locked those in, a global pandemic and recession where long-end rates went to 0, missed out on additional income and massive capital gains potential for a handful of years, and were bailed out of all of it by a combination of an unforeseen hard market for insurance which ballooned the float that could then be invested at higher rates as rates rose their fastest pace in 50-years ....from supply chain disruptions/inflation expectations and not Trump's economic growth from policies passed 5-years priors. 

 

I'm not upset about it. The terrible call and investor fatigue after a string of terrible calls is what allowed me to renter the position in size at $250-450 2-years after selling my stake for $500-600. 

 

But I'm not rewriting the history because they got lucky - they were wrong from 2016 - 2020. They were right from 2021 - 2024. 2025 onward remains to be seen, but it's a coin toss and I don't like those odds. Would prefer to see neutral duration positioning with their alpha earned on credit opportunities. They seem to have a better track record with that.  

 

Rates peaked at the end of 2018. Rates started getting cut in summer of 2019 due to pandemic concerns. The pandemic threw a wrench in everything. I'm not saying you're wrong or right, but you seem to be boxing management in to a specific window of time in order to make a decision. If the pandemic never happened isn't it plausible they could have been right? 

 

Just playing devils advocate....